August 27, 2025 • 19 mins
Nvidia, the world’s most valuable publicly traded company, gave a tepid revenue forecast for the current period, fueling concerns that a massive run-up in artificial intelligence spending is slowing. Sales will be roughly $54 billion in the fiscal third quarter, which runs through October, the company said in a statement Wednesday. Though that was in line with the average Wall Street estimate, some analysts had projected more than $60 billion. The forecast excluded data center revenue from China, a market where it has struggled with US export restrictions and opposing pressure from Beijing.
The outlook adds to concern that pace of investment in artificial intelligence systems is unsustainable. The difficulties in China also have clouded Nvidia’s business. Though the Trump administration recently eased curbs on exports of some AI chips to that country, the reprieve hasn’t yet translated into a rebound in revenue.
For instant reaction and analysis, hosts Tim Stenovec and Isabelle Lee speak with:
- Bloomberg Intelligence Global Head of Technology Research Mandeep Singh
- Bloomberg News Big Tech Team Leader Sarah Frier
- Jay Goldberg, Senior Analyst, Semiconductors & Electronics with Seaport Research Partners
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is a breaking news updated from Bloomberg instant reaction
and analysis from our three thousand journalists and analysts around
the world. Okay, here the numbers are crossing. Second quarter
revenue did beat estimates. Second quarter adjusted earnings per share
coming in at one dollar and five cent. Second quarter
revenue coming in at forty six point seven billion dollars.
(00:32):
The estimates for forty six point two to three billion
dollars second quarter adjusted gross margin seventy two point seven percent.
Second quarter data center revenue. This is the big one.
Forty one point one billion dollars. Estimates were for forty
one point twenty nine a billion second quarter gaming revenue
four point three billion. That did at beat estimates. As
far as the outlook goes, Nvidia c second third quarter
(00:55):
revenue coming in at fifty four billion dollars plus or
minus two percent. Estimate is for fifty three point four
to six billion dollars. Another one worth repeating that data
center revenue for the second quarter forty one point one
billion dollars. The estimate was forty one point twenty nine
billion dollars. In Vidia shares in the after hours they're sinking. Mandy,
(01:16):
come on back in here. You're looking at this on
the Bloomberg terminal on your phone. Why the downside reaction?
Speaker 3 (01:21):
I mean, just the guide the three que expectations were
fifty four to fifty five billion, and to my mind,
this print is not something to be excited about.
Speaker 2 (01:33):
What about this an additional sixty billion dollar share buyback?
That just crossing a sixty billion dollars share buyback when
the stock is close to a record. What does that mean?
Speaker 3 (01:43):
Well, I mean, this company is printing almost one hundred
billion dollars in free cash flow, so it doesn't surprise
me that they are using some of that free cash
flow for buybacks. But if the top line is decelerating,
then the multiple will compress.
Speaker 2 (01:59):
When that headline cross about the share buyback, we did
see shares give back some of those losses. Some other
headlines crossing the Bloomberg terminal with regard to in video,
the company approves an additional sixty billion dollars share buybacks,
one hundred and eighty million dollar release of previously reserved
age twenty inventory, and video says no h twenty sales
(02:19):
to China based customers in the second quarter of the year.
I do want to bring in Jay Goldberg of Seaport.
He joins us from San Francisco. Certainly a disappointment when
it came to that guide, as man Deep said, But
then there's that sixty billion dollars share buyback. What's your
instant reaction.
Speaker 4 (02:36):
I think this is what I was talking about, is
just getting harder and harder for them to beat the
way they have been, right. I think we've all gotten
customed to the having these massive blowouts quarter after quarter,
and it just couldn't continue. Right. This is by you know,
any normal company, this would be an okay quarter, right,
but it's in Vidia. We all have heightened expectations and
it was just I think very difficult for them to
(02:58):
live up to it.
Speaker 1 (03:00):
Fel like it's the outlook for a sales of fifty
four billion plus or minus two percent that is fuzzy
against estimates around fifty three point forty six billion. But
in both cases, remember the wide range of analysts forecasts
due to the unknowns of China, and I feel like
this is what we've talked about tim, how there's such
a broad range and it's hard to predict now, especially
with China. But the all important forecast revenue fifty four
(03:21):
billion dollars looks good compared with consensus.
Speaker 4 (03:24):
I think it's okay. I think that the China factor
is interesting because like a year ago, if somebody or
some country or some even some company wasn't able to
take allocation of their chips for whatever reason, there would
be a line out the door of other customers waiting
to take those chips. And it doesn't seem to be
that the line is that long anymore. Right, there's still
demand there, but it's not this sort of triple oversubscribed
(03:46):
demand that they enjoyed a year ago.
Speaker 2 (03:49):
We're speaking of right now with Jay Goldberg, a senior
analysts for semiconductors and Electronics with Seaport Research Partners. Also
with us is Man Deep saying as he is global
what global head of technology research at this point, He
joins us here in the studio, Mandy, you're glued to
your Bloomberg terminal right now, I'm glued to the live blog,
(04:12):
listening to what you and j are saying. Looking at
headlines here, Investors will want to know what's going on
with Blackwell. The company said that Blackwell Architecture revenue grew
seventeen percent sequentially. What are you watching?
Speaker 3 (04:24):
Yeah, and look, I think that's where the gross margins
are actually trending in the right direction. So they did
say they expect to exit the year with mid seventy
percent gross margins, so that's a positive. The Blackwell ramp
seems to be going well. It's just, you know, when
it comes to the aggregate number, it just is not
(04:46):
that big of a beat and raise, and that's why
you're seeing a stock reaction. But there isn't anything related
to China that I can see in the print, which
is what I was hoping. They gave some color around
expectation for China for the remainder of the year.
Speaker 1 (05:03):
Also in the live blog, we have Ed Lodlow. He's
the co host of Bloomberg.
Speaker 2 (05:06):
Technology, supposed to be on Ventation.
Speaker 1 (05:08):
He's probably just tuned in for this, he says. Curiously.
The company says it benefited from one hundred eighty million
dollar release of previously reserved H twenty inventory from approximately
six hundred and fifty million and unrestricted H twenty sales
to a customer outside of China. What does that mean, Mandy.
Speaker 3 (05:27):
Well, I mean they basically wrote off that inventory and
now they're able to sell some of those H twenty sales.
Remember H twenty is a deprecated version of Blackwell, so
they're able to find a customer outside of China. And
really I think it's points to some sales related to that.
(05:48):
But I mean, one eighty million is not going to
make a dent, you know, when we are talking a
company that is expected to do fifty four billion in
revenue next quarter.
Speaker 2 (05:59):
Jake, come on in this on the China question, the
same thing that Isabel asked mand with regard to what
China is looking like, in Mandeep mentioning that he's not
seeing any outlook in the commentary related to China. Do
you have more questions right now about China than answers.
Speaker 4 (06:16):
As per usual. Yes, there's a lot of questions around this,
I think. I mean, I know from my conversations with
people in the industry there is a lot of demand
for Blackwell in China. There's no one knows if they'll
be able to get any or when they'll be able
to get any. The company did say a quarter ago
at Computext that they had a variant of Blackwell. It
(06:37):
sounds like it's ready to go. They just need approval
to send it. It doesn't sound like they've gotten that
yet because there's no They explicitly say there's no China
sales in their outlook in regards to the H twenty sales.
That's that's interesting because H twenty is just a variant
of the H one hundred. It's a really simple operation
to convert an one hundred into AGE twenty. It's you know,
twenty cents apart or something to make that change. Nobody
(07:00):
had said that they couldn't ship any to anyone else,
only China wanted it. So it is a little bit
encouraging to see them sell some of that, but not
entirely surprising. I also want to point out H twenty
margins are not quite as good as H one hundred margins,
so there's a little bit on margin headwind there. But
to mon deeps point one hundred and eighty million dollars
for sort of China related China tangential sales is just nothing,
(07:24):
nothing really to write about.
Speaker 2 (07:26):
So our Onian King, who covers semiconductors for Bloomberg News,
is out with his write up. The headline and video
gives lackluster forecasts, stoking fears of AI slow down. The
company giving a tepid revenue forecast for the current period.
It fuels concerns that a massive run up in AI
spending is slowing. Is that a concern of yours, Mandeep?
Speaker 3 (07:49):
I mean, I look at you know, their last eight quarters,
they increase the revenue sequentially by four to five billion.
This is the first time when the day data center
sequential growth of forty one point one billion is up
five percent from the prior quarter, which is the slowest growth.
So to my mind, you know there's going to be
(08:10):
any time there is a deceleration. The fact that they
were growing sequentially double digits and now it's mid single digit.
Even with the numbers that they put up. I mean,
these are fantastic numbers, but there is a deceleration. And
you know when they're talking about new architectures, Blackwell and
the margins, as I said, is heading in the right direction.
(08:32):
But that sequential deceleration in data center growth, to me,
that is why you are seeing such a stock reaction.
Speaker 2 (08:39):
So Jay, I'll ask you the question now that the
numbers are out, were you proven right this quarter that
you're the only analyst tracked by Bloomberg that has accelerating
on the terminal.
Speaker 4 (08:48):
I'll take I'll take the win. I'll take I'll take
a lowercase.
Speaker 2 (08:51):
W in the case. I mean, it's not trading out
one hundred dollars yet.
Speaker 4 (08:55):
No, But like I said, my thesis has all along
been that it's just getting harder for them to beat expectations.
And I think this is exactly what happened to her.
Right to men Deep's point, there's not much growth in
data center. You know, you read all the other headlines.
It seems like AI is taking over the world, But
in reality, I think there's just it's we're going to
(09:16):
need some time to digest the AI we already have,
and I think it's natural that things slow down here
for in video who's been leading for so long.
Speaker 2 (09:24):
Is it a red flag to you in any way, Jay,
that the company is authorizing this share buyback. Do growth
companies do that or is that more of a sign
of mature companies.
Speaker 4 (09:34):
It's a little bit of a red sign. I want
to see how they talk about it. I mean, it
would seem to me that there's there's so much opportunity
out there in AI, why why not spend that sixty
billion dollars and furthering their growth. I mean, as a
shareholder I would appreciate it, but as an outside observer,
I have to wonder couldn't they find other ways to
deploy that?
Speaker 3 (09:54):
And the other big thing here is the capex increases
from the hyperscaler. So we know Meta plans to increase
their capex by over thirty percent for twenty twenty six.
But for other hyperscalers, we don't know if they're going
to grow by thirty percent or twenty percent or fifteen percent,
and that will trickle down in terms of what it
means for in Vidia's data center growth. So Google clearly
(10:17):
is the one that relies mostly on their own chips.
And you know, when you think about the incremental buyers
for in Vidio's chips among the hyperscalers, yes there's Oracle
and core Viv, but you know, if you take out
China sovereigns aren't going to make up for that incremental buyer.
And if another hyperscaler develops their own chips, then that
(10:38):
growth rate will come down.
Speaker 4 (10:40):
Again.
Speaker 3 (10:40):
It's a question of whether they grow sequentially five percent,
ten percent, and that will have a bearing on the multiple.
Speaker 1 (10:48):
So in these oh go ahead, Jay.
Speaker 4 (10:51):
I'm just gonna say, and sort of going further with
what Madeep said is if you look at the other hyperscalers,
especially Microsoft and Amazon, they have some pretty big plans
next year for their internal silicon. Right, These are gonna
be big ramp years for their internal silicon, and I
have to wonder if that's sort of chipping away at
the edges of demand for in video.
Speaker 2 (11:12):
That's Jay Goldberg, Jaystick with us, Jay as Senior Analyst
Semiconductors and Electronics with Seaport Research Partners. We're also joined
by Bloomberg Intelligence Global Head of Technology Research, man Deep Singh,
who's here in our studio.
Speaker 1 (11:24):
So you both make the point that it's just hard
to grow from here on out. How much of diversification
is hinged on that We know that forty percent of
the revenue is from Microsoft, Meta, Amazon and I'm missing one.
I can't, I'm blanking on that name. But Vida now
offers computers, networking gear, software services. Can we account on that? Made,
(11:46):
Maybe you can go first?
Speaker 3 (11:47):
Yeah, I mean, look, everyone knows this is a multi
year investment cycle and data centers spend when it comes
to AI would be around trillion dollars. It's just a
growth rate, right, So when you are under forty times
earnings on stock, there is expectations embedded in terms of
the company compounding at you know, thirty forty percent. So
(12:10):
if that growth rate were to taper, then the multiple
comes down. It's still a fantastic growth rate for Nvidia,
it's just the multiple compresses. And that's what I think
is the risk here.
Speaker 1 (12:21):
Do you share the same view, Jay, Yeah?
Speaker 4 (12:24):
I think heeps some it up pretty well, right. I
think there's there's just it's it's good company, good products,
But like this kind of exuberance seems to be getting
ahead of reality of the market. And I mean, I
have to wonder. You have all the hyperscalers spending these
immense amounts of money half a trillion dollars among the
six or seven of these companies. It's it's hard to
(12:46):
see them getting a return on that anytime soon, right,
you sort of looked through it. I don't think they
have a clear plan. They're building for something that's important,
and AI is coming, but in terms of sort of
hard dollars and cents, the ROI on that massive investment,
it's not clear how they generate that, and so I
think we're starting were to start asking more of those
kinds of questions, what are we actually going to use
(13:07):
all this AI for?
Speaker 2 (13:09):
Well, maybe Snowflake can answer the question. I want to
bring man deep saying back in here because he covers
Snowflake shares a Snowflake up now about eleven percent. In
the after hours, the company gave a sales outlook for
the fiscal year that top to analyst estimates. Overcoming anxiety
that software vendors will be hurt as the economy slows
and new AI companies takeaway business, the show has jumped
(13:30):
in extended trading. The narrative has been that software companies
have been beat up for a couple of reasons. One
AI firms are able to do this, and two a
lot of the spending has gone to hardware into expanding
AI capabilities. What is Snowflake earnings telling us?
Speaker 3 (13:44):
And actually Snowflake earnings points to probably something that is
incrementally negative for someone like Nvidia, because so far all
the development in large angrid models was I put all
the open Internet data to an LLM, and LLLM becomes
smarter and smarter. But now what companies are doing with
(14:05):
AI agencies, they are training on their own enterprise data.
That's where someone likes Snowflake or Mango dB benefits because
your training is getting a lot more specialized depending on
the use case. And it's not just about the compute
cluster anymore, but also about the data. And I think
that points to why Snowflake is doing well.
Speaker 2 (14:25):
I want to add another name to our roundtable. I
want to bring in Sarah Fryar. She's Bloomberg News Big
Tech team leader. She joins us from San Francisco. This
was the one we've all been waiting for, and finally
it has arrived, Sarah. The company giving a tepid revenue
forecast for the current period, it fuels concerns that a
massive run up in AI spending is slowing. How are
(14:47):
you thinking about the coverage of this report, especially in
the context of the other big tech companies that we've
heard from who have said, yeah, we are spending when
it comes to AI infrastructure.
Speaker 5 (14:59):
Well, you know, I think we we have to put
it all in context because Nvidia is this in this
space of having so much uncertainty around the China market,
around the future of spend on data centers. The analysts
who cover the company had like fifteen billion dollars in
variants on what they expected the revenue outlook to be,
(15:20):
whether or not they included China in their models. So
a little bit of a grain of salt on that
revenue number forecast. I think it's just it's just a
company where people don't quite know what to make of
their discussions with the Trump administration about what they are
are not allowed to sell to China and whether to
even include that in their models. And they did say
(15:42):
that they didn't sell any of those eight twenty chips
to China in the quarter, So I think it's there's that,
So that doesn't necessarily indicate for us that the AI
boom is over or anything like that. That said, you know,
man Deep is right the training on of models, like
we've seen this with open Ai, like the latest and
(16:07):
greatest model is not as much of a leap from
the prior, and you know, other companies are having similar issues.
So the idea that AI largely engage models are just
going to accelerate in smartness until we reach super intelligence.
I mean that may not be, but there is real
money going to building data centers metas building one the
(16:29):
size of Manhattan and Louisiana like.
Speaker 4 (16:31):
That is not over.
Speaker 5 (16:32):
That is very much still a part of what companies
are investing in and doing.
Speaker 1 (16:38):
I want to bring back in Jay Goldberg. He's senior
analysts at Seaport Research Partners.
Speaker 3 (16:43):
Jay.
Speaker 1 (16:43):
Aside from video stuggles in China, the biggest impediment to growth,
it seems to be also the availability of supply. Can
you talk to us more about that. How Invidia doesn't
own factories and relies on outsourced production.
Speaker 4 (16:56):
So yeah, in videos manufacturing is done at TSMC, and
for a long time, last couple of years, that's been
the big constraint on in Nvidia's capacity is what they
can get out of TSMC, in particular the cook packaging,
the advanced packaging that TSBT does. That's starting to ease
up a little bit. TSMC is a great company. They've
(17:17):
added a lot of capacity, But now we're starting to
realize that the other big constraint on data center growth
is electricity. Right, there's just not enough electricity. With everyone
wanting to open up gigawatts scale data centers for AI,
the US grid just doesn't have enough of that. In fact,
the only place that probably could even hope to cope
(17:38):
with this is China, where there's sort of different regulatory
frameworks around building new electrical capacity, so I think that's
a big bottleneck here. I think there's also issues around
Blackwell itself, Like you start to I've talked to people
who are actually putting these systems in place. It feels
very much like a first generation system. They've added a
lot of new configuration to the racks and the servers
(17:59):
that they've designed, and they're just not fully reliable yet.
And there's a lot of complaints from people who have
to go through all kinds of special tooling and get
outs equipment in order to make basic configurations here. So
I think all of those are sort of constraining Blackwell
to some demands.
Speaker 2 (18:15):
Joint Jay even so generous with your time. I know
you've got to run. You've got a pencil in your hand.
I see you typing sometimes as well before you go.
Are you updating your price target tomorrow? Are you coming
out with a note like what's the conclusion that you
have ahead of this call?
Speaker 4 (18:33):
So I absolutely will come out a note. I don't
think I can comment on my price target, but I
see this as a lot of things moving in the
direction that I've been talking about for a while.
Speaker 2 (18:42):
Now, Jay Goldberg, we're gonna say goodbye to him. He
is a senior analyst for Semiconductors and Electronics with Seaport
Research Partners. Reminded everybody he's the only analyst that's tracked
by Bloomberg who's got a cell rating on in Nvidia.
The price target that he has is one hundred dollars,
a far cry from the morning and one hundred dollars
one hundred and eighty dollars it was trading at before
(19:02):
those numbers came out. Also with US is Sarah Fryer.
She's Bloomberg News Big Tech leader. In Mandeep Singh. Mandeep
is Bloomberg Intelligence Global Head of Technology Research.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is a breaking news updated from Bloomberg instant reaction
and analysis from our three thousand journalists and analysts around
the world. Okay, here the numbers are crossing. Second quarter
revenue did beat estimates. Second quarter adjusted earnings per share
coming in at one dollar and five cent. Second quarter
revenue coming in at forty six point seven billion dollars.
(00:32):
The estimates for forty six point two to three billion
dollars second quarter adjusted gross margin seventy two point seven percent.
Second quarter data center revenue. This is the big one.
Forty one point one billion dollars. Estimates were for forty
one point twenty nine a billion second quarter gaming revenue
four point three billion. That did at beat estimates. As
far as the outlook goes, Nvidia c second third quarter
(00:55):
revenue coming in at fifty four billion dollars plus or
minus two percent. Estimate is for fifty three point four
to six billion dollars. Another one worth repeating that data
center revenue for the second quarter forty one point one
billion dollars. The estimate was forty one point twenty nine
billion dollars. In Vidia shares in the after hours they're sinking. Mandy,
(01:16):
come on back in here. You're looking at this on
the Bloomberg terminal on your phone. Why the downside reaction?
Speaker 3 (01:21):
I mean, just the guide the three que expectations were
fifty four to fifty five billion, and to my mind,
this print is not something to be excited about.
Speaker 2 (01:33):
What about this an additional sixty billion dollar share buyback?
That just crossing a sixty billion dollars share buyback when
the stock is close to a record. What does that mean?
Speaker 3 (01:43):
Well, I mean, this company is printing almost one hundred
billion dollars in free cash flow, so it doesn't surprise
me that they are using some of that free cash
flow for buybacks. But if the top line is decelerating,
then the multiple will compress.
Speaker 2 (01:59):
When that headline cross about the share buyback, we did
see shares give back some of those losses. Some other
headlines crossing the Bloomberg terminal with regard to in video,
the company approves an additional sixty billion dollars share buybacks,
one hundred and eighty million dollar release of previously reserved
age twenty inventory, and video says no h twenty sales
(02:19):
to China based customers in the second quarter of the year.
I do want to bring in Jay Goldberg of Seaport.
He joins us from San Francisco. Certainly a disappointment when
it came to that guide, as man Deep said, But
then there's that sixty billion dollars share buyback. What's your
instant reaction.
Speaker 4 (02:36):
I think this is what I was talking about, is
just getting harder and harder for them to beat the
way they have been, right. I think we've all gotten
customed to the having these massive blowouts quarter after quarter,
and it just couldn't continue. Right. This is by you know,
any normal company, this would be an okay quarter, right,
but it's in Vidia. We all have heightened expectations and
it was just I think very difficult for them to
(02:58):
live up to it.
Speaker 1 (03:00):
Fel like it's the outlook for a sales of fifty
four billion plus or minus two percent that is fuzzy
against estimates around fifty three point forty six billion. But
in both cases, remember the wide range of analysts forecasts
due to the unknowns of China, and I feel like
this is what we've talked about tim, how there's such
a broad range and it's hard to predict now, especially
with China. But the all important forecast revenue fifty four
(03:21):
billion dollars looks good compared with consensus.
Speaker 4 (03:24):
I think it's okay. I think that the China factor
is interesting because like a year ago, if somebody or
some country or some even some company wasn't able to
take allocation of their chips for whatever reason, there would
be a line out the door of other customers waiting
to take those chips. And it doesn't seem to be
that the line is that long anymore. Right, there's still
demand there, but it's not this sort of triple oversubscribed
(03:46):
demand that they enjoyed a year ago.
Speaker 2 (03:49):
We're speaking of right now with Jay Goldberg, a senior
analysts for semiconductors and Electronics with Seaport Research Partners. Also
with us is Man Deep saying as he is global
what global head of technology research at this point, He
joins us here in the studio, Mandy, you're glued to
your Bloomberg terminal right now, I'm glued to the live blog,
(04:12):
listening to what you and j are saying. Looking at
headlines here, Investors will want to know what's going on
with Blackwell. The company said that Blackwell Architecture revenue grew
seventeen percent sequentially. What are you watching?
Speaker 3 (04:24):
Yeah, and look, I think that's where the gross margins
are actually trending in the right direction. So they did
say they expect to exit the year with mid seventy
percent gross margins, so that's a positive. The Blackwell ramp
seems to be going well. It's just, you know, when
it comes to the aggregate number, it just is not
(04:46):
that big of a beat and raise, and that's why
you're seeing a stock reaction. But there isn't anything related
to China that I can see in the print, which
is what I was hoping. They gave some color around
expectation for China for the remainder of the year.
Speaker 1 (05:03):
Also in the live blog, we have Ed Lodlow. He's
the co host of Bloomberg.
Speaker 2 (05:06):
Technology, supposed to be on Ventation.
Speaker 1 (05:08):
He's probably just tuned in for this, he says. Curiously.
The company says it benefited from one hundred eighty million
dollar release of previously reserved H twenty inventory from approximately
six hundred and fifty million and unrestricted H twenty sales
to a customer outside of China. What does that mean, Mandy.
Speaker 3 (05:27):
Well, I mean they basically wrote off that inventory and
now they're able to sell some of those H twenty sales.
Remember H twenty is a deprecated version of Blackwell, so
they're able to find a customer outside of China. And
really I think it's points to some sales related to that.
(05:48):
But I mean, one eighty million is not going to
make a dent, you know, when we are talking a
company that is expected to do fifty four billion in
revenue next quarter.
Speaker 2 (05:59):
Jake, come on in this on the China question, the
same thing that Isabel asked mand with regard to what
China is looking like, in Mandeep mentioning that he's not
seeing any outlook in the commentary related to China. Do
you have more questions right now about China than answers.
Speaker 4 (06:16):
As per usual. Yes, there's a lot of questions around this,
I think. I mean, I know from my conversations with
people in the industry there is a lot of demand
for Blackwell in China. There's no one knows if they'll
be able to get any or when they'll be able
to get any. The company did say a quarter ago
at Computext that they had a variant of Blackwell. It
(06:37):
sounds like it's ready to go. They just need approval
to send it. It doesn't sound like they've gotten that
yet because there's no They explicitly say there's no China
sales in their outlook in regards to the H twenty sales.
That's that's interesting because H twenty is just a variant
of the H one hundred. It's a really simple operation
to convert an one hundred into AGE twenty. It's you know,
twenty cents apart or something to make that change. Nobody
(07:00):
had said that they couldn't ship any to anyone else,
only China wanted it. So it is a little bit
encouraging to see them sell some of that, but not
entirely surprising. I also want to point out H twenty
margins are not quite as good as H one hundred margins,
so there's a little bit on margin headwind there. But
to mon deeps point one hundred and eighty million dollars
for sort of China related China tangential sales is just nothing,
(07:24):
nothing really to write about.
Speaker 2 (07:26):
So our Onian King, who covers semiconductors for Bloomberg News,
is out with his write up. The headline and video
gives lackluster forecasts, stoking fears of AI slow down. The
company giving a tepid revenue forecast for the current period.
It fuels concerns that a massive run up in AI
spending is slowing. Is that a concern of yours, Mandeep?
Speaker 3 (07:49):
I mean, I look at you know, their last eight quarters,
they increase the revenue sequentially by four to five billion.
This is the first time when the day data center
sequential growth of forty one point one billion is up
five percent from the prior quarter, which is the slowest growth.
So to my mind, you know there's going to be
(08:10):
any time there is a deceleration. The fact that they
were growing sequentially double digits and now it's mid single digit.
Even with the numbers that they put up. I mean,
these are fantastic numbers, but there is a deceleration. And
you know when they're talking about new architectures, Blackwell and
the margins, as I said, is heading in the right direction.
(08:32):
But that sequential deceleration in data center growth, to me,
that is why you are seeing such a stock reaction.
Speaker 2 (08:39):
So Jay, I'll ask you the question now that the
numbers are out, were you proven right this quarter that
you're the only analyst tracked by Bloomberg that has accelerating
on the terminal.
Speaker 4 (08:48):
I'll take I'll take the win. I'll take I'll take
a lowercase.
Speaker 2 (08:51):
W in the case. I mean, it's not trading out
one hundred dollars yet.
Speaker 4 (08:55):
No, But like I said, my thesis has all along
been that it's just getting harder for them to beat expectations.
And I think this is exactly what happened to her.
Right to men Deep's point, there's not much growth in
data center. You know, you read all the other headlines.
It seems like AI is taking over the world, But
in reality, I think there's just it's we're going to
(09:16):
need some time to digest the AI we already have,
and I think it's natural that things slow down here
for in video who's been leading for so long.
Speaker 2 (09:24):
Is it a red flag to you in any way, Jay,
that the company is authorizing this share buyback. Do growth
companies do that or is that more of a sign
of mature companies.
Speaker 4 (09:34):
It's a little bit of a red sign. I want
to see how they talk about it. I mean, it
would seem to me that there's there's so much opportunity
out there in AI, why why not spend that sixty
billion dollars and furthering their growth. I mean, as a
shareholder I would appreciate it, but as an outside observer,
I have to wonder couldn't they find other ways to
deploy that?
Speaker 3 (09:54):
And the other big thing here is the capex increases
from the hyperscaler. So we know Meta plans to increase
their capex by over thirty percent for twenty twenty six.
But for other hyperscalers, we don't know if they're going
to grow by thirty percent or twenty percent or fifteen percent,
and that will trickle down in terms of what it
means for in Vidia's data center growth. So Google clearly
(10:17):
is the one that relies mostly on their own chips.
And you know, when you think about the incremental buyers
for in Vidio's chips among the hyperscalers, yes there's Oracle
and core Viv, but you know, if you take out
China sovereigns aren't going to make up for that incremental buyer.
And if another hyperscaler develops their own chips, then that
(10:38):
growth rate will come down.
Speaker 4 (10:40):
Again.
Speaker 3 (10:40):
It's a question of whether they grow sequentially five percent,
ten percent, and that will have a bearing on the multiple.
Speaker 1 (10:48):
So in these oh go ahead, Jay.
Speaker 4 (10:51):
I'm just gonna say, and sort of going further with
what Madeep said is if you look at the other hyperscalers,
especially Microsoft and Amazon, they have some pretty big plans
next year for their internal silicon. Right, These are gonna
be big ramp years for their internal silicon, and I
have to wonder if that's sort of chipping away at
the edges of demand for in video.
Speaker 2 (11:12):
That's Jay Goldberg, Jaystick with us, Jay as Senior Analyst
Semiconductors and Electronics with Seaport Research Partners. We're also joined
by Bloomberg Intelligence Global Head of Technology Research, man Deep Singh,
who's here in our studio.
Speaker 1 (11:24):
So you both make the point that it's just hard
to grow from here on out. How much of diversification
is hinged on that We know that forty percent of
the revenue is from Microsoft, Meta, Amazon and I'm missing one.
I can't, I'm blanking on that name. But Vida now
offers computers, networking gear, software services. Can we account on that? Made,
(11:46):
Maybe you can go first?
Speaker 3 (11:47):
Yeah, I mean, look, everyone knows this is a multi
year investment cycle and data centers spend when it comes
to AI would be around trillion dollars. It's just a
growth rate, right, So when you are under forty times
earnings on stock, there is expectations embedded in terms of
the company compounding at you know, thirty forty percent. So
(12:10):
if that growth rate were to taper, then the multiple
comes down. It's still a fantastic growth rate for Nvidia,
it's just the multiple compresses. And that's what I think
is the risk here.
Speaker 1 (12:21):
Do you share the same view, Jay, Yeah?
Speaker 4 (12:24):
I think heeps some it up pretty well, right. I
think there's there's just it's it's good company, good products,
But like this kind of exuberance seems to be getting
ahead of reality of the market. And I mean, I
have to wonder. You have all the hyperscalers spending these
immense amounts of money half a trillion dollars among the
six or seven of these companies. It's it's hard to
(12:46):
see them getting a return on that anytime soon, right,
you sort of looked through it. I don't think they
have a clear plan. They're building for something that's important,
and AI is coming, but in terms of sort of
hard dollars and cents, the ROI on that massive investment,
it's not clear how they generate that, and so I
think we're starting were to start asking more of those
kinds of questions, what are we actually going to use
(13:07):
all this AI for?
Speaker 2 (13:09):
Well, maybe Snowflake can answer the question. I want to
bring man deep saying back in here because he covers
Snowflake shares a Snowflake up now about eleven percent. In
the after hours, the company gave a sales outlook for
the fiscal year that top to analyst estimates. Overcoming anxiety
that software vendors will be hurt as the economy slows
and new AI companies takeaway business, the show has jumped
(13:30):
in extended trading. The narrative has been that software companies
have been beat up for a couple of reasons. One
AI firms are able to do this, and two a
lot of the spending has gone to hardware into expanding
AI capabilities. What is Snowflake earnings telling us?
Speaker 3 (13:44):
And actually Snowflake earnings points to probably something that is
incrementally negative for someone like Nvidia, because so far all
the development in large angrid models was I put all
the open Internet data to an LLM, and LLLM becomes
smarter and smarter. But now what companies are doing with
(14:05):
AI agencies, they are training on their own enterprise data.
That's where someone likes Snowflake or Mango dB benefits because
your training is getting a lot more specialized depending on
the use case. And it's not just about the compute
cluster anymore, but also about the data. And I think
that points to why Snowflake is doing well.
Speaker 2 (14:25):
I want to add another name to our roundtable. I
want to bring in Sarah Fryar. She's Bloomberg News Big
Tech team leader. She joins us from San Francisco. This
was the one we've all been waiting for, and finally
it has arrived, Sarah. The company giving a tepid revenue
forecast for the current period, it fuels concerns that a
massive run up in AI spending is slowing. How are
(14:47):
you thinking about the coverage of this report, especially in
the context of the other big tech companies that we've
heard from who have said, yeah, we are spending when
it comes to AI infrastructure.
Speaker 5 (14:59):
Well, you know, I think we we have to put
it all in context because Nvidia is this in this
space of having so much uncertainty around the China market,
around the future of spend on data centers. The analysts
who cover the company had like fifteen billion dollars in
variants on what they expected the revenue outlook to be,
(15:20):
whether or not they included China in their models. So
a little bit of a grain of salt on that
revenue number forecast. I think it's just it's just a
company where people don't quite know what to make of
their discussions with the Trump administration about what they are
are not allowed to sell to China and whether to
even include that in their models. And they did say
(15:42):
that they didn't sell any of those eight twenty chips
to China in the quarter, So I think it's there's that,
So that doesn't necessarily indicate for us that the AI
boom is over or anything like that. That said, you know,
man Deep is right the training on of models, like
we've seen this with open Ai, like the latest and
(16:07):
greatest model is not as much of a leap from
the prior, and you know, other companies are having similar issues.
So the idea that AI largely engage models are just
going to accelerate in smartness until we reach super intelligence.
I mean that may not be, but there is real
money going to building data centers metas building one the
(16:29):
size of Manhattan and Louisiana like.
Speaker 4 (16:31):
That is not over.
Speaker 5 (16:32):
That is very much still a part of what companies
are investing in and doing.
Speaker 1 (16:38):
I want to bring back in Jay Goldberg. He's senior
analysts at Seaport Research Partners.
Speaker 3 (16:43):
Jay.
Speaker 1 (16:43):
Aside from video stuggles in China, the biggest impediment to growth,
it seems to be also the availability of supply. Can
you talk to us more about that. How Invidia doesn't
own factories and relies on outsourced production.
Speaker 4 (16:56):
So yeah, in videos manufacturing is done at TSMC, and
for a long time, last couple of years, that's been
the big constraint on in Nvidia's capacity is what they
can get out of TSMC, in particular the cook packaging,
the advanced packaging that TSBT does. That's starting to ease
up a little bit. TSMC is a great company. They've
(17:17):
added a lot of capacity, But now we're starting to
realize that the other big constraint on data center growth
is electricity. Right, there's just not enough electricity. With everyone
wanting to open up gigawatts scale data centers for AI,
the US grid just doesn't have enough of that. In fact,
the only place that probably could even hope to cope
(17:38):
with this is China, where there's sort of different regulatory
frameworks around building new electrical capacity, so I think that's
a big bottleneck here. I think there's also issues around
Blackwell itself, Like you start to I've talked to people
who are actually putting these systems in place. It feels
very much like a first generation system. They've added a
lot of new configuration to the racks and the servers
(17:59):
that they've designed, and they're just not fully reliable yet.
And there's a lot of complaints from people who have
to go through all kinds of special tooling and get
outs equipment in order to make basic configurations here. So
I think all of those are sort of constraining Blackwell
to some demands.
Speaker 2 (18:15):
Joint Jay even so generous with your time. I know
you've got to run. You've got a pencil in your hand.
I see you typing sometimes as well before you go.
Are you updating your price target tomorrow? Are you coming
out with a note like what's the conclusion that you
have ahead of this call?
Speaker 4 (18:33):
So I absolutely will come out a note. I don't
think I can comment on my price target, but I
see this as a lot of things moving in the
direction that I've been talking about for a while.
Speaker 2 (18:42):
Now, Jay Goldberg, we're gonna say goodbye to him. He
is a senior analyst for Semiconductors and Electronics with Seaport
Research Partners. Reminded everybody he's the only analyst that's tracked
by Bloomberg who's got a cell rating on in Nvidia.
The price target that he has is one hundred dollars,
a far cry from the morning and one hundred dollars
one hundred and eighty dollars it was trading at before
(19:02):
those numbers came out. Also with US is Sarah Fryer.
She's Bloomberg News Big Tech leader. In Mandeep Singh. Mandeep
is Bloomberg Intelligence Global Head of Technology Research.
Hosts And Creators
Tim Stenovec
Carol Massar
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